Theories of Economic Development

Chapter 2

Theories of Economic Development

Abstract This chapter reviews some of the most prominent theories of economic

development. These theories describe tools and strategies for making development

goals achievable. The chapter starts with early views about the nature of economic

prosperity. The chapter then reviews classical theories with four main clusters:

linear stages of growth models; structural change models; international dependence

models; and neoclassical counter-revolution models. Subsequently, contemporary

theories of economic development, including new growth theory and theory of

coordination failure, are reviewed. Finally, implications of the changes in the

development thoughts and their importance in studying development problems in

the developing countries conclude the chapter.

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Keywords Economic development goals Theories of economic development

Developing countries Classical theories Contemporary theories

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2.1 Introduction

The problems of economic development, which are complex and multidimensional,

have resulted in the development of a number of theories, explanations, arguments

and assertions (World Bank 2000). The purpose of this chapter is to review some of

the most prominent theories of economic development. These theories describe tools

and strategies for making development goals achievable. The chapter starts with early

views about the nature of economic prosperity. The chapter then reviews classical

theories with four main clusters: linear stages of growth models; structural change

models; international dependence models; and neoclassical counter-revolution

models. Subsequently, contemporary theories of economic development, including

new growth theory and theory of coordination failure, are reviewed. Finally,

implications of the changes in the development thoughts and their importance in

studying development problems in the developing countries conclude the chapter.

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